Actually, SCIC has performed the first business affairs in a new style, the style of a financial investor.

Bringing an enterprise out of ‘dead gate’

In mid 2006, a great event in the aviation sector of Vietnam took place when Pacific Airlines, a wholly state-owned firm, procured a strategic investor by selling 30% of its shares to Australia’s Qantas Airways.

This event was not only greatly meaningful to Pacific Airlines but also created a great change in the aviation market of Vietnam and made remarkable impacts on Vietnam Airlines.

Qantas paid $50 million to own 30% of stocks of Pacific Airlines and to become Pacific Airlines’ strategic shareholder. This price amazed even insiders because though Pacific Airlines is the second airline in Vietnam with initial capital of VND40 billion ($2.5 million), its debts and losses by the end of 2005 amounted to VND200 billion ($12.5 million).

Before Qantas became a strategic shareholder of Pacific Airlines, SCIC took over and managed Pacific Airlines. At that time, SCIC had to solve a difficult problem because Pacific Airlines was on the brink of bankruptcy. A foreign investor planned to invest in the firm but they had to give up that idea.

In an effort to restructure Pacific Airlines, SCIC invested around VND400 billion ($25 million) to settle Pacific Airlines’ debts and losses and to stabilise the firm’s operations and began to seek foreign investors. Finally, Pacific Airlines escaped from the risk of bankruptcy and has begun to make profit. The firm’s market value is now up to $180 million.

Pacific Airlines General Director Luong Hoai Nam said that SCIC well performed its job, with a strategic vision on business restructuring and a lot of determination.

SCIC has recently implemented another restructuring scheme, which is small scale but very well thought out: the negotiation to sell part of state capital in the Dong Anh Shoe Joint Stock Company.

After equitisation, the state capital volume in this company was transferred to the administration of SCIC. At this time, this company was in complicated situation due to internal conflicts. The Taiwanese partner intended to withdraw and the lives of nearly 3,000 workers were threatened.

SCIC replaced officials who caused hindrances in the board of directors of the company to stabilise the situation. More importantly, SCIC persuaded the long-term Taiwanese partner to become the strategic shareholder. The partner then bought shares at the price of 1.5 times more than the face value.

Another case took place very quietly: transferring the state capital in the Bao Minh-CMG joint venture to Japan’s Diachi Life Insurance Company. The most difficult thing was that this joint venture did business at a loss for years but SCIC had to perform a smooth transfer of capital to not affect the market and the buyer.

This affair took place quietly in several months. After the transfer was announced, this company still operated normally and it didn’t lose any client.

Le Thi Bang Tam, Chairman of the Board of Directors of SCIC, said that after taking over the management of state capital at enterprises, SCIC would restructure them, develop the state capital by bringing the enterprises to the stock market and take back the state capital through enterprise auction or selling the state shares through the stock market.

Earning profit from super projects and big enterprises

Ms. Tam said that SCIC was preparing to take part in many big infrastructure projects, including the construction of a new international airport in the northern province of Hai Duong, seaports in Van Phong Bay, Khanh Hoa province, and infrastructure facilities in HCM City.

“When SCIC mentions investment in airports or seaports, many experts worry that SCIC doesn’t have knowledge about those fields. However, SCIC will join hands with other investors to establish joint stock companies to perform those projects. We will hire leading consulting experts to build international standard works. After those projects are complete, SCIC will sell its capital in the project to claim back money for the state. That’s the way of investment of a professional financial investor,” Ms. Tam said.

SCIS plans to withdraw state capital from many enterprises that the state doesn’t need to invest in to focus investment on the group of strategic enterprises which have the influence to promote the country’s GDP growth.

Under its plan, by 2020 SCIC will invest in 100-150 companies totalling $40 billion.

Nguyen Van Tuan, Chairman of the Board of Directors of the Vietnam Construction Import Export Corporation (Vinaconex), said that Vinaconex put great expectations on SCIC. The corporation’s current chartered capital is VND1,500 billion ($93.75 million), 63% of which is state capital.

Vinaconex will increase its chartered capital by VND500 billion ($31.25 million) to VND2,000 billion this year.

“We hope that the increase of capital will attract foreign investors and SCIC will help Vinaconex implement that strategy,” Mr. Tuan said.

Source: Dau Tu.